EPR Properties (NYSE:EPR) today announced operating results for
the third quarter and nine months ended September 30, 2020 (dollars
in thousands, except per share data):
Three Months Ended September
30,
Nine Months Ended September
30,
2020 (1
)
2019 (2
)
2020 (1
)
2019 (2
)
Total revenue from continuing
operations
$
63,877
$
169,356
$
321,249
$
481,623
Net (loss) income available to common
shareholders
(91,938
)
27,969
(129,853
)
147,844
Net (loss) income available to common
shareholders per diluted common share
(1.23
)
0.36
(1.70
)
1.94
Funds From Operations as adjusted (FFOAA)
(a non-GAAP financial measure)
(11,699
)
115,309
95,645
323,519
FFOAA per diluted common share (a non-GAAP
financial measure)
(0.16
)
1.46
1.25
4.19
Adjusted Funds From Operations (AFFO) (a
non-GAAP financial measure)
2,698
113,647
126,078
323,567
AFFO per diluted common share (a non-GAAP
financial measure)
0.04
1.44
1.65
4.19
(1) The operating results for the three and nine months ended
September 30, 2020, include $49.8 million of straight-line and
other receivable write-offs, or $0.67 per share, related to moving
two customers to cash basis for revenue recognition purposes at the
end of the third quarter. These write-offs are reflected in all
metrics in these columns except that AFFO per diluted share for the
three and nine months ended September 30, 2020 excludes the impact
of the straight-line portion of these write-offs totaling $23.9
million.
(2) The operating results of the Company's public charter school
portfolio for the three and nine months ended September 30, 2019,
include $11.3 million and $22.9 million in termination fees,
respectively, and are included in all metrics in these columns
except for total revenue from continuing operations. The remaining
public charter school portfolio was sold subsequent to September
30, 2019.
Third Quarter Company Headlines
- Collections Ramping Up - For July, August and September,
cash collections from customers continued to improve and were
approximately 35%, 40% and 48% of contractual cash revenue,
respectively.
- Property Openings Increase - Approximately 93% of
non-theatre properties and 63% of theatre properties were open as
of November 3, 2020. In addition, New York and California are
making progress in reopening theatres.
- Strong Liquidity Position - The Company had minimal cash
burn during the quarter and with nearly $1.0 billion of cash on
hand at quarter-end, the Company believes it has sufficient
liquidity to navigate through the impact of the pandemic.
- Extension of Covenant Waivers - Waivers of certain
covenants related to the Company’s bank credit facilities have been
extended through December 31, 2021, providing additional
flexibility to work through issues with customers as needed. The
Company is currently negotiating a similar covenant waiver
extension relating to its private placement notes.
- Two Customers Placed on Cash Basis – At the end of the
quarter, two customers were placed on cash basis for revenue
recognition purposes and, as a result, all of the associated
receivables related to these two customers were written-off.
CEO Comments
“As the impact of the COVID-19 pandemic persists, we continue to
focus on ensuring our strong liquidity position and helping to
facilitate on-going property openings and tenant recovery,” stated
Greg Silvers, Company President and CEO. “We limited our cash burn
during the quarter and reached rent resolution with the vast
majority of our customers and have seen an improvement in cash
collections. We have also extended our debt covenant waivers on our
bank credit facilities to provide additional flexibility through
the end of next year. While uncertainty remains, particularly
around the timing of a widespread reopening of theatres, we are
encouraged by the return to business of the rest of our customers
and our stable balance sheet position.”
COVID-19 Response and Update
Collections and Property Openings
Approximately 93% of the Company's non-theatre and 63% of the
Company's theatre locations were open for business as of November
3, 2020. Cash collections from tenants and borrowers during the
third quarter continued to improve and were 35%, 40% and 48% for
July, August and September, respectively. The Company has reached
resolution with customers representing approximately 90% of its
annualized pre-COVID contractual cash rent and interest payments,
however, additional deferral agreements related to certain theatre
tenants are currently being negotiated as discussed below. Based on
the Company's current agreements and ongoing negotiations with
customers, permanent rent and interest payment adjustments are
currently expected to lower annualized pre-COVID contractual cash
rent and interest payments by approximately 5% to 7%. However,
there can be no assurance that additional permanent rent or
interest payment reductions or other term modifications will not
occur in future periods in light of the continued adverse impact of
the pandemic, particularly ongoing uncertainty in the theatre
industry.
Theatre Update
The customers occupying the Company's theatre properties are
facing several challenges as they diligently try to reopen. As a
result of the impact of the COVID-19 pandemic, some of our theatre
locations remain closed due to state and local restrictions,
including key markets in New York and California. Other theatres
are currently closed by operator choice, including 52 of our
theatres operated by Regal Cinemas ("Regal"), a subsidiary of
Cineworld Group, as movie studios continue to delay the release of
blockbuster movies in hopes that larger audiences will be available
as additional markets open. The delay of these movie releases has
had a significant negative impact on current and expected box
office performance. Although the Company previously completed
deferral agreements with respect to substantially all of its
theatre properties, the Company is currently working on additional
deferral agreements with certain of its theatre customers as a
result of these continuing challenges.
Due to the challenges facing theatres and the continued
uncertainty caused by the pandemic, at the end of the third
quarter, the Company determined it was appropriate to begin
recognizing revenue from Regal on a cash basis. Accordingly, the
Company recorded write-offs of accounts receivable of approximately
$49.8 million, or $0.67 per share, at the end of the quarter ended
September 30, 2020 related to Regal as well as one attraction
tenant where a similar assessment was made that cash accounting is
appropriate. The write-offs were recorded primarily as a reduction
in rental revenue and consisted of $23.9 million in straight line
rent receivables and $25.9 million of other receivables.
Below provides an update of classification of customers as of
September 30, 2020:
Classification of
Customers
($ in millions)
Annualized Revenue (1)
No Payment Deferral
$
107
17
%
Payments Deferred and Recognized as
Revenue During Deferral Period
233
37
%
Payments Deferred But Not Recognized as
Revenue During Deferral Period
29
5
%
Cash Basis/Lease Restructurings (2)
245
39
%
New Vacancies
10
2
%
Total
$
624
100
%
(1) Represents annualized pre-COVID
contractual revenue which includes cash rent (including tenant
reimbursements) and interest payments.
(2) Includes leases for tenants accounted
for on a cash basis and/or leases for tenants that have been or are
expected to be restructured. This category includes AMC and
Regal.
Strong Liquidity Position
The Company remains focused on maintaining strong liquidity and
financial flexibility through the pandemic. The Company’s cash
provided by operations (which includes interest payments) of $2.0
million, less preferred dividends paid of $6.0 million, resulted in
an outflow of $4.0 million during the quarter. The Company has no
scheduled debt maturities until 2022 and had over $985.0 million of
cash on hand at quarter-end. As discussed in more detail below, the
Company amended the agreement governing its bank credit facilities
to, among other things, extend the waiver of the Company's
obligations to comply with certain covenants through the earlier of
December 31, 2021, or when the Company provides notice that it
elects to terminate the covenant relief period, subject to certain
conditions.
Other Charges
As a result of the COVID-19 pandemic, the Company reassessed the
expected holding periods of two Eat & Play properties during
the third quarter, and determined that the estimated cash flows
were not sufficient to recover the carrying values. Accordingly,
during the three months ended September 30, 2020, the Company
recognized non-cash impairment charges on real estate investments
of $11.6 million for these two properties. Also during the third
quarter, the Company recognized credit loss expense totaling $5.7
million that primarily related to reserving the outstanding
principal balance of one note receivable due to recent changes in
the borrower's financial status as a result of the COVID-19
pandemic.
During the third quarter, the Company recognized $18.4 million
in income tax expense that primarily related to recognizing a full
valuation allowance of $18.0 million on deferred tax assets related
to the Company's taxable REIT subsidiary and Canadian tax paying
entity as a result of the uncertainty of realization created by the
COVID-19 pandemic.
Portfolio Update
The Company's total investments (a non-GAAP financial measure)
were approximately $6.7 billion at September 30, 2020 with
Experiential totaling $5.9 billion, or 89%, and Education totaling
$0.8 billion, or 11%.
The Company's Experiential portfolio (excluding property under
development) consisted of the following property types (owned or
financed) at September 30, 2020:
- 180 theatre properties;
- 56 eat & play properties (including seven theatres located
in entertainment districts);
- 18 attraction properties;
- 13 ski properties;
- six experiential lodging properties;
- one gaming property;
- three cultural properties; and
- seven fitness & wellness properties.
As of September 30, 2020, the Company's owned Experiential
portfolio consisted of approximately 19.5 million square feet,
which was 96.4% leased and included $44.1 million in property under
development and $22.8 million in undeveloped land inventory.
The Company's Education portfolio consisted of the following
property types (owned or financed) at September 30, 2020:
- 69 early childhood education center properties; and
- 16 private school properties.
As of September 30, 2020, the Company's owned Education
portfolio consisted of approximately 1.9 million square feet, which
was 100% leased and included $3.0 million in undeveloped land
inventory.
The combined owned portfolio consisted of 21.4 million square
feet and was 96.7% leased.
Investment Update
The Company's investment spending for the three months ended
September 30, 2020 totaled $8.7 million (bringing the year-to-date
investment spending to $62.3 million), and included spending on
Experiential build-to-suit development and redevelopment
projects.
Balance Sheet and Liquidity Update
At September 30, 2020, the Company's net debt to gross assets
ratio (a non-GAAP Financial Measure) was 42%.
At September 30, 2020, the Company had $985.4 million of
unrestricted cash on hand and $750.0 million outstanding under its
$1.0 billion unsecured revolving credit facility. The Company has
no scheduled debt maturities until 2022 when its unsecured
revolving credit facility comes due.
During the quarter ended September 30, 2020, Moody's downgraded
the credit rating for the Company's unsecured debt to Baa3. As a
result, the interest rate spreads on the Company's outstanding
borrowings under its bank credit facilities increased by 0.25%.
Subsequent to September 30, 2020, Fitch and Standard and Poor's
downgraded the credit ratings for the Company's unsecured debt to
BB+. As a result, the interest rate payable on the Company's
outstanding private placement notes increased by 0.60%. In
addition, as a result of these downgrades, the Company is in the
process of causing certain of its key subsidiaries to guarantee the
Company's obligations under its bank credit facilities, private
placement notes and other outstanding senior unsecured notes in
accordance with existing agreements with the holders of such
indebtedness.
On November 3, 2020, the Company amended the agreement governing
its bank credit facilities (including its revolving credit facility
and $400.0 million term loan). The amendment modified certain
provisions and extended the waiver of the Company's obligation to
comply with certain covenants under these facilities through
December 31, 2021 in light of the continuing financial and
operational impacts of the COVID-19 pandemic on the Company and its
tenants and borrowers. The Company can elect to terminate the
covenant relief period early, subject to certain conditions. The
loans subject to the modifications continue to bear interest at the
same higher rates during the covenant relief period as specified in
the previous waiver, and will return to the original pre-waiver
levels at the end of such period, subject to certain conditions.
The rates during and after the covenant relief period continue to
be subject to change based on long-term unsecured debt ratings, as
defined in the agreements.
The amendment to the agreement governing the Company's bank
credit facilities continues to impose additional restrictions on
the Company during the covenant relief period, including
limitations on certain investments, incurrences of indebtedness,
capital expenditures, payment of dividends or other distributions,
minimum liquidity and share repurchases, in each case subject to
certain exceptions. The Company is currently negotiating a similar
covenant waiver extension relating to its $340.0 million of private
placement notes.
Dividend Information
The monthly cash dividend to common shareholders was suspended
following the common share dividend paid on May 15, 2020 to
shareholders of record as of April 30, 2020. The Company is
restricted from paying dividends on its common shares during the
covenant relief period, subject to certain limited exceptions, and
there can be no assurances as to the Company's ability to
reinstitute cash dividend payments to common shareholders or the
timing thereof.
The Board declared its regular quarterly dividends to preferred
shareholders of $0.359375 per share on its 5.75% Series C
cumulative convertible preferred shares, $0.5625 per share on its
9.00% Series E cumulative convertible preferred shares and
$0.359375 per share on its 5.75% Series G cumulative redeemable
preferred shares.
Conference Call Information
Management will host a conference call to discuss the Company's
financial results on November 5, 2020 at 8:30 a.m. Eastern Time.
The call may also include discussion of Company developments, and
forward-looking and other material information about business and
financial matters. The conference will be webcast and can be
accessed via the Webcasts page in the Investor Center on the
Company's website located at http://investors.eprkc.com/webcasts.
To access the call, audio only, dial (866) 587-2930 and when
prompted, provide the passcode 1372156.
You may watch a replay of the webcast by visiting the Webcasts
page at http://investors.eprkc.com/webcasts.
Quarterly Supplemental
The Company's supplemental information package for the third
quarter and nine months ended September 30, 2020 is available in
the Investor Center on the Company's website located at
http://investors.eprkc.com/earnings-supplementals.
EPR Properties
Consolidated Statements of
(Loss) Income
(Unaudited, dollars in
thousands except per share data)
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
Rental revenue
$
55,591
$
150,962
$
288,165
$
438,257
Other income
182
11,464
8,171
17,534
Mortgage and other financing income
8,104
6,930
24,913
25,832
Total revenue
63,877
169,356
321,249
481,623
Property operating expense
13,759
14,494
42,181
44,642
Other expense
2,680
11,403
15,012
19,494
General and administrative expense
10,034
11,600
31,454
35,540
Severance expense
—
1,521
—
1,941
Costs associated with loan refinancing or
payoff
—
38,269
820
38,269
Interest expense, net
41,744
36,667
114,837
107,088
Transaction costs
2,776
5,959
4,622
18,005
Credit loss expense
5,707
—
10,383
—
Impairment charges
11,561
—
62,825
—
Depreciation and amortization
42,059
41,644
128,319
116,436
(Loss) income before equity in (loss)
income from joint ventures, other items and discontinued
operations
(66,443
)
7,799
(89,204
)
100,208
Equity in (loss) income from joint
ventures
(1,044
)
(435
)
(3,188
)
524
Impairment charges on joint ventures
—
—
(3,247
)
—
Gain on sale of real estate
—
845
242
457
(Loss) income before income taxes
(67,487
)
8,209
(95,397
)
101,189
Income tax (expense) benefit
(18,417
)
600
(16,354
)
2,505
(Loss) income from continuing
operations
$
(85,904
)
$
8,809
$
(111,751
)
$
103,694
Discontinued operations:
Income from discontinued operations before
other items
—
11,736
—
32,304
Gain on sale of real estate from
discontinued operations
—
13,458
—
29,948
Income from discontinued operations
—
25,194
—
62,252
Net (loss) income
(85,904
)
34,003
(111,751
)
165,946
Preferred dividend requirements
(6,034
)
(6,034
)
(18,102
)
(18,102
)
Net (loss) income available to common
shareholders of EPR Properties
$
(91,938
)
$
27,969
$
(129,853
)
$
147,844
Net (loss) income available to common
shareholders of EPR Properties per share:
Continuing operations
$
(1.23
)
$
0.04
$
(1.70
)
$
1.12
Discontinued operations
—
0.32
—
0.82
Basic
$
(1.23
)
$
0.36
$
(1.70
)
$
1.94
Continuing operations
$
(1.23
)
$
0.04
$
(1.70
)
$
1.12
Discontinued operations
—
0.32
—
0.82
Diluted
$
(1.23
)
$
0.36
$
(1.70
)
$
1.94
Shares used for computation (in
thousands):
Basic
74,613
77,632
76,456
76,169
Diluted
74,613
77,664
76,456
76,207
EPR Properties
Condensed Consolidated Balance
Sheets
(Unaudited, dollars in
thousands)
September 30, 2020
December 31, 2019
Assets
Real estate investments, net of
accumulated depreciation of $1,072,201 and $989,254 at September
30, 2020 and December 31, 2019, respectively
$
5,067,657
$
5,197,308
Land held for development
25,846
28,080
Property under development
44,103
36,756
Operating lease right-of-use assets
185,459
211,187
Mortgage notes and related accrued
interest receivable
362,011
357,391
Investment in joint ventures
29,571
34,317
Cash and cash equivalents
985,372
528,763
Restricted cash
2,424
2,677
Accounts receivable
129,714
86,858
Other assets
75,053
94,174
Total assets
$
6,907,210
$
6,577,511
Liabilities and Equity
Accounts payable and accrued
liabilities
$
95,429
$
122,939
Operating lease liabilities
225,379
235,650
Dividends payable
6,063
35,458
Unearned rents and interest
75,415
74,829
Debt
3,854,855
3,102,830
Total liabilities
4,257,141
3,571,706
Total equity
$
2,650,069
$
3,005,805
Total liabilities and equity
$
6,907,210
$
6,577,511
The historical financial results of the public charter schools
sold by the Company in 2019 are reflected in the Company's
consolidated statements of income as discontinued operations for
the three and nine months ended September 30, 2019. The operating
results relating to discontinued operations are as follows
(unaudited, dollars in thousands):
Three Months Ended September
30, 2019
Nine Months Ended September
30, 2019
Rental revenue
$
10,300
$
31,058
Mortgage and other financing income
5,206
12,421
Total revenue
15,506
43,479
Property operating expense
169
585
Costs associated with loan refinancing or
payoff
138
138
Interest expense, net
(27
)
(344
)
Depreciation and amortization
3,490
10,796
Income from discontinued operations before
other items
11,736
32,304
Gain on sale of real estate
13,458
29,948
Income from discontinued operations
$
25,194
$
62,252
Non-GAAP Financial Measures
Funds From Operations (FFO), Funds From Operations As
Adjusted (FFOAA) and Adjusted Funds From Operations (AFFO)
The National Association of Real Estate Investment Trusts
(“NAREIT”) developed FFO as a relative non-GAAP financial measure
of performance of an equity REIT in order to recognize that
income-producing real estate historically has not depreciated on
the basis determined under GAAP. Pursuant to the definition of FFO
by the Board of Governors of NAREIT, the Company calculates FFO as
net income available to common shareholders, computed in accordance
with GAAP, excluding gains and losses from disposition of real
estate and impairment losses on real estate, plus real estate
related depreciation and amortization, and after adjustments for
unconsolidated partnerships, joint ventures and other affiliates.
Adjustments for unconsolidated partnerships, joint ventures and
other affiliates are calculated to reflect FFO on the same basis.
The Company has calculated FFO for all periods presented in
accordance with this definition.
In addition to FFO, the Company presents FFOAA and AFFO. FFOAA
is presented by adding to FFO costs associated with loan
refinancing or payoff, transaction costs, severance expense,
preferred share redemption costs, impairment of operating lease
right-of-use assets, termination fees associated with tenants'
exercises of public charter school buy-out options and credit loss
expense and subtracting deferred income tax (benefit) expense. AFFO
is presented by adding to FFOAA non-real estate depreciation and
amortization, deferred financing fees amortization, share-based
compensation expense to management and Trustees and amortization of
above and below market leases, net and tenant allowances; and
subtracting maintenance capital expenditures (including second
generation tenant improvements and leasing commissions),
straight-lined rental revenue (removing impact of straight-lined
ground sublease expense), and the non-cash portion of mortgage and
other financing income.
FFO, FFOAA and AFFO are widely used measures of the operating
performance of real estate companies and are provided here as a
supplemental measure to GAAP net income available to common
shareholders and earnings per share, and management provides FFO,
FFOAA and AFFO herein because it believes this information is
useful to investors in this regard. FFO, FFOAA and AFFO are
non-GAAP financial measures. FFO, FFOAA and AFFO do not represent
cash flows from operations as defined by GAAP and are not
indicative that cash flows are adequate to fund all cash needs and
are not to be considered alternatives to net income or any other
GAAP measure as a measurement of the results of our operations or
our cash flows or liquidity as defined by GAAP. It should also be
noted that not all REITs calculate FFO, FFOAA and AFFO the same way
so comparisons with other REITs may not be meaningful.
The following table summarizes FFO, FFOAA and AFFO for the three
and nine months ended September 30, 2020 and 2019 and reconciles
such measures to net income available to common shareholders, the
most directly comparable GAAP measure:
EPR Properties
Reconciliation of Non-GAAP
Financial Measures
(Unaudited, dollars in
thousands except per share data)
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
FFO:
Net (loss) income available to common
shareholders of EPR Properties
$
(91,938
)
$
27,969
$
(129,853
)
$
147,844
Gain on sale of real estate
—
(14,303
)
(242
)
(30,405
)
Impairment of real estate investments, net
(1)
11,561
—
47,816
—
Real estate depreciation and
amortization
41,791
44,863
127,467
126,475
Allocated share of joint venture
depreciation
369
553
1,130
1,662
Impairment charges on joint ventures
—
—
3,247
—
FFO available to common shareholders of
EPR Properties
$
(38,217
)
$
59,082
$
49,565
$
245,576
FFO available to common shareholders of
EPR Properties
$
(38,217
)
$
59,082
$
49,565
$
245,576
Add: Preferred dividends for Series C
preferred shares
—
—
—
5,817
Add: Preferred dividends for Series E
preferred shares
—
—
—
5,817
Diluted FFO available to common
shareholders of EPR Properties
$
(38,217
)
$
59,082
$
49,565
$
257,210
FFOAA:
FFO available to common shareholders of
EPR Properties
$
(38,217
)
$
59,082
49,565
$
245,576
Costs associated with loan refinancing or
payoff
—
38,407
820
38,407
Transaction costs
2,776
5,959
4,622
18,005
Severance expense
—
1,521
—
1,941
Termination fees included in gain on
sale
—
11,324
—
22,858
Impairment of operating lease right-of-use
assets (1)
—
—
15,009
—
Credit loss expense
5,707
—
10,383
—
Deferred income tax expense (benefit)
18,035
(984
)
15,246
(3,268
)
FFOAA available to common shareholders of
EPR Properties
$
(11,699
)
$
115,309
$
95,645
$
323,519
FFOAA available to common shareholders of
EPR Properties
$
(11,699
)
$
115,309
$
95,645
$
323,519
Add: Preferred dividends for Series C
preferred shares
—
1,939
—
5,817
Add: Preferred dividends for Series E
preferred shares
—
1,939
—
5,817
Diluted FFOAA available to common
shareholders of EPR Properties
$
(11,699
)
$
119,187
$
95,645
$
335,153
AFFO:
FFOAA available to common shareholders of
EPR Properties
$
(11,699
)
$
115,309
$
95,645
$
323,519
Non-real estate depreciation and
amortization
268
271
852
757
Deferred financing fees amortization
1,498
1,552
4,783
4,571
Share-based compensation expense to
management and trustees
3,410
3,372
10,382
9,832
Amortization of above and below market
leases, net and tenant allowances
(124
)
(107
)
(384
)
(224
)
Maintenance capital expenditures (2)
(8,911
)
(2,370
)
(11,130
)
(3,177
)
Straight-lined rental revenue
17,969
(4,399
)
25,448
(10,036
)
Straight-lined ground sublease expense
216
256
599
645
Non-cash portion of mortgage and other
financing income
71
(237
)
(117
)
(2,320
)
AFFO available to common shareholders of
EPR Properties
$
2,698
$
113,647
$
126,078
$
323,567
AFFO available to common shareholders of
EPR Properties
$
2,698
$
113,647
$
126,078
$
323,567
Add: Preferred dividends for Series C
preferred shares
—
1,939
—
5,817
Add: Preferred dividends for Series E
preferred shares
—
1,939
—
5,817
Diluted AFFO available to common
shareholders of EPR Properties
$
2,698
$
117,525
$
126,078
$
335,201
FFO per common share:
Basic
$
(0.51
)
$
0.76
$
0.65
$
3.22
Diluted
(0.51
)
0.76
0.65
3.21
FFOAA per common share:
Basic
$
(0.16
)
$
1.49
$
1.25
$
4.25
Diluted
(0.16
)
1.46
1.25
4.19
AFFO per common share:
Basic
$
0.04
$
1.46
$
1.65
$
4.25
Diluted
0.04
1.44
1.65
4.19
Shares used for computation (in
thousands):
Basic
74,613
77,632
76,456
76,169
Diluted
74,613
77,664
76,456
76,207
Weighted average shares
outstanding-diluted EPS
74,613
77,664
76,456
76,207
Effect of dilutive Series C preferred
shares
—
2,170
—
2,158
Effect of dilutive Series E preferred
shares
—
1,634
—
1,628
Adjusted weighted average shares
outstanding-diluted Series C and Series E
74,613
81,468
76,456
79,993
Other financial information:
Dividends per common share
$
—
$
1.1250
$
1.5150
$
3.3750
Amounts above include the impact of discontinued operations,
which are separately classified in the consolidated statements of
income for all periods.
(1) Impairment charges recognized during the nine months ended
September 30, 2020 totaled $62.8 million, which was comprised of
$47.8 million of impairments of real estate investments and $15.0
million of impairments of operating lease right-of-use assets.
(2) Includes maintenance capital expenditures and certain second
generation tenant improvements and leasing commissions.
The conversion of the 5.75% Series C cumulative convertible
preferred shares and the 9.00% Series E cumulative convertible
preferred shares would be dilutive to FFO per share for the nine
months ended September 30, 2019 and FFOAA per share for the three
and nine months ended September 30, 2019. Therefore, the additional
common shares that would result from the conversion and the
corresponding add-back of the preferred dividends declared on those
shares are included in the calculation of diluted FFO and FFOAA per
share for these periods.
Net Debt
Net Debt represents debt (reported in accordance with GAAP)
adjusted to exclude deferred financing costs, net and reduced for
cash and cash equivalents. By excluding deferred financing costs,
net and reducing debt for cash and cash equivalents on hand, the
result provides an estimate of the contractual amount of borrowed
capital to be repaid, net of cash available to repay it. The
Company believes this calculation constitutes a beneficial
supplemental non-GAAP financial disclosure to investors in
understanding our financial condition. The Company's method of
calculating Net Debt may be different from methods used by other
REITs and, accordingly, may not be comparable to such other
REITs.
Gross Assets
Gross Assets represents total assets (reported in accordance
with GAAP) adjusted to exclude accumulated depreciation and reduced
for cash and cash equivalents. By excluding accumulated
depreciation and reducing cash and cash equivalents, the result
provides an estimate of the investment made by the Company. The
Company believes that investors commonly use versions of this
calculation in a similar manner. The Company's method of
calculating Gross Assets may be different from methods used by
other REITs and, accordingly, may not be comparable to such other
REITs.
Net Debt to Gross Assets
Net Debt to Gross Assets is a supplemental measure derived from
non-GAAP financial measures that the Company uses to evaluate
capital structure and the magnitude of debt to gross assets. The
Company believes that investors commonly use versions of this ratio
in a similar manner. The Company's method of calculating Net Debt
to Gross Assets may be different from methods used by other REITs
and, accordingly, may not be comparable to such other REITs.
EBITDAre
NAREIT developed EBITDAre as a relative non-GAAP financial
measure of REITs, independent of a company's capital structure, to
provide a uniform basis to measure the enterprise value of a
company. Pursuant to the definition of EBITDAre by the Board of
Governors of NAREIT, the Company calculates EBITDAre as net income,
computed in accordance with GAAP, excluding interest expense (net),
income tax (benefit) expense, depreciation and amortization, gains
and losses from disposition of real estate, impairment losses on
real estate, costs associated with loan refinancing or payoff and
adjustments for unconsolidated partnerships, joint ventures and
other affiliates.
Management provides EBITDAre herein because it believes this
information is useful to investors as a supplemental performance
measure as it can help facilitate comparisons of operating
performance between periods and with other REITs. The Company's
method of calculating EBITDAre may be different from methods used
by other REITs and, accordingly, may not be comparable to such
other REITs. EBITDAre is not a measure of performance under GAAP,
does not represent cash generated from operations as defined by
GAAP and is not indicative of cash available to fund all cash
needs, including distributions. This measure should not be
considered an alternative to net income or any other GAAP measure
as a measurement of the results of the Company's operations or cash
flows or liquidity as defined by GAAP.
Adjusted EBITDA
Management uses Adjusted EBITDA in its analysis of the
performance of the business and operations of the Company.
Management believes Adjusted EBITDA is useful to investors because
it excludes various items that management believes are not
indicative of operating performance, and that it is an informative
measure to use in computing various financial ratios to evaluate
the Company. The Company defines Adjusted EBITDA as EBITDAre
(defined above) for the quarter excluding severance expense, credit
loss expense, transaction costs, impairment losses on operating
lease right-of-use assets and prepayment fees. For the three months
ended September 30, 2020, Adjusted EBITDA was further adjusted to
reflect Adjusted EBITDA on a cash basis related to Regal and one
attraction tenant.
The Company's method of calculating Adjusted EBITDA may be
different from methods used by other REITs and, accordingly, may
not be comparable to such other REITs. Adjusted EBITDA is not a
measure of performance under GAAP, does not represent cash
generated from operations as defined by GAAP and is not indicative
of cash available to fund all cash needs, including distributions.
This measure should not be considered as an alternative to net
income or any other GAAP measure as a measurement of the results of
the Company's operations or cash flows or liquidity as defined by
GAAP.
Reconciliations of debt and total assets (all reported in
accordance with GAAP) to Net Debt, Gross Assets, Net Debt to Gross
Assets, EBITDAre and Adjusted EBITDA (each of which is a non-GAAP
financial measure) are included in the following tables (unaudited,
in thousands):
September 30,
2020
2019
Net Debt:
Debt
$
3,854,855
$
3,101,611
Deferred financing costs, net
35,140
38,384
Cash and cash equivalents
(985,372
)
(115,839
)
Net Debt
$
2,904,623
$
3,024,156
Gross Assets:
Total Assets
$
6,907,210
$
6,633,290
Accumulated depreciation
1,072,201
989,480
Cash and cash equivalents
(985,372
)
(115,839
)
Gross Assets
$
6,994,039
$
7,506,931
Net Debt to Gross Assets
42
%
40
%
Three Months Ended September
30,
2020
2019
EBITDAre and Adjusted EBITDA:
Net (loss) income
$
(85,904
)
$
34,003
Interest expense, net
41,744
36,640
Income tax expense (benefit)
18,417
(600
)
Depreciation and amortization
42,059
45,134
Gain on sale of real estate
—
(14,303
)
Impairment of real estate investments,
net
11,561
—
Costs associated with loan refinancing or
payoff
—
38,407
Allocated share of joint venture
depreciation
369
553
Allocated share of joint venture interest
expense
741
739
EBITDAre
$
28,987
$
140,573
Severance expense
—
1,521
Transaction costs
2,776
5,959
Credit loss expense
5,707
—
Accounts receivable write-offs from prior
periods (1)
13,533
—
Straight-line receivable write-offs from
prior periods (1)
19,927
—
Prepayment fees
—
(1,760
)
Adjusted EBITDA
$
70,930
$
146,293
Amounts above include the impact of
discontinued operations, which are separately classified in the
consolidated statements of (loss) income and comprehensive (loss)
income.
(1) Included in rental revenue from
continuing operations in the accompanying consolidated statements
of income. Rental revenue includes the following:
Three Months Ended September
30,
2020
2019
Minimum rent
$
83,230
$
139,844
Accounts receivable write-offs from prior
periods
(13,533
)
—
Tenant reimbursements
2,413
5,129
Percentage rent
1,303
3,032
Straight-line rental revenue
1,958
2,866
Straight-line receivable write-offs from
prior periods
(19,927
)
—
Other rental revenue
147
91
Rental revenue
$
55,591
$
150,962
Total Investments
Total investments is a non-GAAP financial measure defined as the
sum of the carrying values of real estate investments (before
accumulated depreciation), land held for development, property
under development, mortgage notes receivable (including related
accrued interest receivable), investment in joint ventures,
intangible assets, gross (before accumulated amortization and
included in other assets) and notes receivable and related accrued
interest receivable, net (included in other assets). Total
investments is a useful measure for management and investors as it
illustrates across which asset categories the Company's funds have
been invested. Our method of calculating total investments may be
different from methods used by other REITs and, accordingly, may
not be comparable to such other REITs. A reconciliation of total
investments to total assets (computed in accordance with GAAP) is
included in the following table (unaudited, in thousands):
September 30, 2020
December 31, 2019
Total Investments:
Real estate investments, net of
accumulated depreciation
$
5,067,657
$
5,197,308
Add back accumulated depreciation on real
estate investments
1,072,201
989,254
Land held for development
25,846
28,080
Property under development
44,103
36,756
Mortgage notes and related accrued
interest receivable
362,011
357,391
Investment in joint ventures
29,571
34,317
Intangible assets, gross (1)
58,402
57,385
Notes receivable and related accrued
interest receivable, net (1)
7,373
14,026
Total investments
$
6,667,164
$
6,714,517
Total investments
$
6,667,164
$
6,714,517
Operating lease right-of-use assets
185,459
211,187
Cash and cash equivalents
985,372
528,763
Restricted cash
2,424
2,677
Accounts receivable
129,714
86,858
Less: accumulated depreciation on real
estate investments
(1,072,201
)
(989,254
)
Less: accumulated amortization on
intangible assets
(15,385
)
(12,693
)
Prepaid expenses and other current
assets
24,663
35,456
Total assets
$
6,907,210
$
6,577,511
(1) Included in other assets in the
accompanying consolidated balance sheet. Other assets include the
following:
September 30, 2020
December 31, 2019
Intangible assets, gross
$
58,402
$
57,385
Less: accumulated amortization on
intangible assets
(15,385
)
(12,693
)
Notes receivable and related accrued
interest receivable, net
7,373
14,026
Prepaid expenses and other current
assets
24,663
35,456
Total other assets
$
75,053
$
94,174
About EPR Properties
EPR Properties is a leading experiential net lease real estate
investment trust (REIT), specializing in select enduring
experiential properties in the real estate industry. We focus on
real estate venues which create value by facilitating out of home
leisure and recreation experiences where consumers choose to spend
their discretionary time and money. We have nearly $6.7 billion in
total investments across 44 states. We adhere to rigorous
underwriting and investing criteria centered on key industry,
property and tenant level cash flow standards. We believe our
focused approach provides a competitive advantage and the potential
for stable and attractive returns. Further information is available
at www.eprkc.com.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
The financial results in this press release reflect preliminary,
unaudited results, which are not final until the Company's
Quarterly Report on Form 10-Q is filed. With the exception of
historical information, certain statements contained or
incorporated by reference herein may contain forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”),
such as those pertaining to the uncertain financial impact of
COVID-19, our capital resources and liquidity, expected waivers of
financial covenants related to our private placement notes,
expected liquidity and performance of our customers, including AMC
and Regal, our expected revenue and customer deferral agreements,
our expected dividend payments and share repurchases and our
results of operations and financial condition. The estimates
presented herein are based on the Company's current expectations
and, given the current economic uncertainty, there can be no
assurances that the Company will be able to continue to comply with
other applicable covenants under its debt agreements, which could
materially impact actual performance. Forward-looking statements
involve numerous risks and uncertainties and you should not rely on
them as predictions of actual events. There is no assurance the
events or circumstances reflected in the forward-looking statements
will occur. You can identify forward-looking statements by use of
words such as “will be,” “intend,” “continue,” “believe,” “may,”
“expect,” “hope,” “anticipate,” “goal,” “forecast,” “pipeline,”
“estimates,” “offers,” “plans,” “would” or other similar
expressions or other comparable terms or discussions of strategy,
plans or intentions contained or incorporated by reference herein.
While references to commitments for investment spending are based
on present commitments and agreements of the Company, we cannot
provide assurance that these transactions will be completed on
satisfactory terms. Forward-looking statements necessarily are
dependent on assumptions, data or methods that may be incorrect or
imprecise. These forward-looking statements represent our
intentions, plans, expectations and beliefs and are subject to
numerous assumptions, risks and uncertainties. Many of the factors
that will determine these items are beyond our ability to control
or predict. For further discussion of these factors see “Item 1A.
Risk Factors” in our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2020 filed with the Securities and Exchange
Commission ("SEC") on May 11, 2020.
For these statements, we claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. You are cautioned not to place undue
reliance on our forward-looking statements, which speak only as of
the date hereof or the date of any document incorporated by
reference herein. All subsequent written and oral forward-looking
statements attributable to us or any person acting on our behalf
are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section. Except as
required by law, we do not undertake any obligation to release
publicly any revisions to our forward-looking statements to reflect
events or circumstances after the date hereof.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201104005706/en/
EPR Properties Brian Moriarty, 888-EPR-REIT
www.eprkc.com
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